Category Archives: Mobile

I took this chart from Criteo’s recently published Mobile Commerce Report. It’s amazing to see how fast mobile is taking share from desktop and great to see the UK leading other western markets, as we do in just about all areas of ecommerce.

Other interesting points from the report include:

Smartphones now account for a greater share of mobile transactions than tablets (although not in the UK)

Android and iOS convert similarly, although Android transaction volume is about 65% of iOS

mCommerce works for high value as well as low value goods – fashion is a key vertical for mobile

It’s been troubling me recently that at first glance the trend towards mobile and the trend within mobile towards apps mitigates against startup ecommerce companies. Amazon is one of the first apps I download whenever I change phone, but it’s the only ecommerce app that I have, and that’s because Amazon is the only place I shop frequently enough to be bothered to download an app. I’m not the best example customer because I don’t shop much, but generalising the problem I think there aren’t many categories of ecommerce where the interaction is frequent enough to merit an app. Grocery shopping is a weekly event for most people and that merits an app, and shopping for shoes is a monthly endeavour for many people, hopefully frequent enough for our portfolio company Stylect to prosper, but most shopping isn’t like that.

So it was interesting to read a great post from Intercom.io this morning about the End of apps as we know them. It’s one of the bests posts I’ve read in a while, largely because I think they may well have mapped out how mobile services will be designed in the future. The quick summary is that they believe engagement and interaction will shift from within apps to within interactive cards in a notification or ‘Google Now like’ stream. It’s a long post, but if you are involved with apps or mobile design you should definitely go read it (I linked to it twice to make it easy for you).

The idea that we will stop opening apps and live within a stream of cards requires quite a headshift, but it makes a lot of sense to me. Having pages of apps is highly inefficient and reminds me of browsing the web in Yahoo or AOL days – there has to be something better and a highly personalised and contextual stream of interactive cards sounds like a good answer.

Ecommerce discovery would then be through the cards of other services. As an example, maybe you find out about Stylect from within a Twitter card and then agree to receive regular cards direct from Stylect – that could be by downloading an app which sits in the background barely seen. Search will still play a role, but maybe a greater percentage of stuff we want is finding us rather than the other way around.

Getting discovered then requires getting a presence in cards, and to me that feels like social media advertising rather than search advertising. Perhaps unsurprisingly this muted shift from web to cards might be bad news for Google and good news for Facebook, Twitter, and whoever’s next.

Finally, for all this to work the personalisation and contextual targeting needs to be great. The cards need to be good enough that we want to read them. That’s different from some of the irritating notifications I get today.

Mobile analytics firm Flurry released some interesting data yesterday showing a clear trend towards bigger screen phones. They define phablets as devices with 5-7″ screens, and that includes devices like the Nexus 5 (that I own) Samsung Galaxy S4 and now the iPhone 6 Plus. Tablets are flat to down.

These bigger screen devices are much easier to use – e.g. for reading, email and shopping – and that comes through in the app usage stats below. Note there are no iPhones in the phablet group.

As you can see from the chart above only 3% of mobile app developers are making more than $100k per month/$1.2m per year. Assuming the same power law applies as monthly revenues scale further it’s a fair guess that only 3% of that 3%, i.e. 0.1%, are making $1m+ per month or $12m+ per year. That’s one in a thousand making enough to be interesting as a VC backed startup. Not great odds.

And it’s getting worse. The latest news is that app downloads are decreasing. The average Brit has downloaded 1.8 apps to their phone, down from 2.3 a year ago and 31% of smartphone owners have no third party apps on their phone at all (up from 20% last year).

The trends show that developers are still increasingly favouring apps over web technologies, but I’m thinking that might change soon. Maybe it will become easier to make money on the mobile web than from apps. It doesn’t seem like that’s a high bar.

The chart above came from Vision Mobile State of Nation Q3 2014 which you can download for free here (registration required).

It’s a common refrain that the process by which apps are found or discovered is broken. Discovery and hence download volumes are driven more than anything by ‘app store placement’ and by being ‘featured’, both of which seem to be more down to the whim of Apple and Google than the merit of the app. What we need is an equivalent of Google’s Page Rank, but for apps. That way good apps would float to the top and discovery would be more meritocratic. That would be better for startups who often have great products but lack the resources or the networks to curry favour with Google and Apple.

The current discovery process isn’t completely broken, in that Apple and Google do take the quality of the app and it’s popularity into consideration, but it isn’t right. Consider these stories. Two similar stage startups that we are close to have recently been playing the App Store game with Apple. They both networked hard to get close to the right people at Apple, developed features that Apple suggested they should and then held back release of those features in the hope of getting promoted. One got promoted in a big way (Stylect) and the other got only a low placement in an App Store category with little traffic. Neither knew until the day of the promotion. That can’t be the best way to do things.

However, Apple and Google are both heavily invested in the status quo. Their app stores earn them a lot of money and are a protective moat for their mobile phone businesses. So I’m not expecting things to change quickly. Thus I was surprised to read this morning that app store competition is increasing. Tomasz Tunguz has found that app store volatility has increased substantially over the last twelve months which indicates that new entrants are doing better and that discovery is getting less broken.

That’s a little bit of good news for startups in an area where they don’t usually get much. I like to think that one day we will have an open system on mobile, but until we do life will be harder for young companies than it needs to be and we will get less investment and innovation in mobile than we could.

Mary Meeker has just published her excellent annual roundup of Internet Trends. As always there’s lots of good stuff in there. My biggest takeaway is best explained by this slide:

Across the whole world mobile data usage continues to grow and take share, yet in the developed world smart phone penetration is approaching saturation levels and growth in device sales has slowed. The opportunity space is shifting from exploiting people have phones and we know where they are, to leveraging newer developments to increase usage.

The first wave of mobile startups mostly took advantage of the fact that people had computers in their pockets to offer them services that are only useful when you are on the move. Uber/Hailo, Foursquare and Waze are good examples. My hunch is that we are largely through this phase now. Enough people have had enough smartphones for long enough that most of the good ideas will have been done already.

However, as we can see from the chart above we are all using our phones more and more, and where there is a change in behaviour like this there is opportunity. From a commerce perspective I’m excited about opportunities that fall into these two buckets:

companies that push the boundaries of UX design to make commerce entertaining – people turn to their smartphones to fill idle moments and compelling product discovery experiences can profit from that. Mary Meeker cites Houzz as an example of a company in this space. Stylect from our portfolio is another.

companies that leverage the rising number of sensors in phones and connected to phones to build exciting new products – Fitbit and our portfolio company Big Health fall into this category

Benedict Evans wrote an interesting yesterday about Android fragmentation (tl:dr 75% of devices that hit the Play Store run Android 4.x meaning Google has reduced the impact of fragmentation, additionally they’ve sidestepped the issue for their own services by moving them out of the OS and into a software layer that can be updated over the air). However, the point I want to bring out is his list of the issues startups should consider as they choose whether to develop first for iOS or for Android:

Android has a much larger addressable market – people who can afford $50 devices up to $600 rather than just $600

Anything on the bleeding edge won’t work predictably on many Android devices

There are more early adopters on Android than iOS

As Benedict notes, this leaves developers facing the paradox that the open platform is harder to hack and forces startup CEOs to make the trade off between keeping dev costs and time to market down on the one hand and reaching more early adopters and a larger market on the other.

Most startups we see opt to go iPhone first because that allows them to maximise the speed and efficiency of learning.

I love my Android phone and I’ve always thought that as Android gains market share over iOS more startups would start to develop first for Android and I would stop having to wait months for new apps to come my way. I’m now thinking my wait will continue.

The idea has been building for a while now that tablets are losing significance as a category of devices and last week Benedict Evans posted data that to my mind makes the case unequivocally.

The main news here is that iPad sales have flattened:

Evans also has data showing that Android tablets aren’t having much of an impact.

The other parts of the story are that smartphone sales continue to rocket and PC sales continue their slow decline. Check out Evans’ post for more data and a fuller argument.

From the perspective of the ecommerce companies in which we invest the most important conclusion is that smartphones are going to continue to take an increasing share of transactions and the importance of working well on mobile early in the life of a company continues to grow. Evans’ emerging and more interesting conclusion is that it’s making less sense to think too much about tablets as a separate category. The use cases for tablets are not that different to laptops – they are similarly sized items to carry after all – so keeping things simple by thinking about two primary experiences – small screen (smartphone) and big screen (tablet, laptop, desktop) makes good sense.

As you can see from the chart above time spent accessing the web from mobile apps has now passed time spent accessing the web for PCs. Moreover, the trends are only going one way, which begs the question of when it will become the norm for startups to build an app before they build a website.

Up until now there have been a few ‘mobile first’ startups, but they have been the exception rather than the norm. I see that balance shifting. We are close to backing our first (maybe the first) ‘mobile first’ ecommerce business.

Remember also that the action is increasingly phones now rather than tablets.

Brief Bio on Me

Managing Partner at Forward Partners - on a mission to invest in the UK's best eCommerce companies.

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